[Aliantha]

We call that initial low rate a honeymoon rate and it normally last for 1 to 2 years and then you're at normal variable rates.

I don't see why arm loans should be more subject to stupid borrowers. In fact, variable rate loans are far more popular in Oz than fixed. I suspect that will change shortly though with market trends the way they are. That is to say, I think if you could get a good fixed rate at the moment you'd be wise because interest rates here are steadily climbing and they're about to go through the roof (in my opinion).

That being said though, if you can't afford an extra $100 per month to cover higher interest rates, you shouldn't be taking out the loan. In fact it is my personal opinion tht if you're not paying off at least $500 more than the minimum of your loan per month, you should rethink what you're doing. It's stupid to take out a loan that you can only just afford.

I don't think the government or anyone else should be offering people bail out deals although I do see the consequences of not trying to prop up the market. The problem is, it is just a prop up, and sooner rather than later, the stilts are going to cave in, and the more bad risks you have sitting on them, the worse the crash is going to be.

I believe banks should immediately address their lending criteria and slowly tighten the belt on existing mortgages that're in default. In this way, the damage would be less than it will be in the future if banks continue to employ these delaying tactics.